FATF publishes red flag indicators of virtual assets for money laundering and terrorist financing
On Monday, September 14th, 2020, the FATF released a report on Virtual Assets’ Red Flag Indicators. This report is designed to assist reporting entities, including Financial Institutions (FIs), Designated Non-Financial Firms and Professions (DNFBPs), and VASPs. The red flag indicators are an excellent place to start and mainly focus on money laundering indicators for VASPs.
The FATF report lists warning signs in the following categories:
Red flag indicators related to transactions
Transaction size and frequency
Red flag indicators related to transaction patterns
New User Transactions
Transactions that affect all users
Red flag indicators related to anonymity
Warnings about senders or recipients
Irregularities observed during account creation observed
Irregularities observed during the CDD process
Profile of potential money mule or fraud victims
Other unusual behavior
Red flags as to the source of funds or assets
Warning signs of geographic risks
One limitation of the red flags is that some indicators are not visible from an individual What is a Virtual Asset Service Provider (VASP)? A virtual A … more or FI. Besides, tThe paper does not identify itself DeFi as potential money laundering risk.
Despite the focus on VASPs, the paper is does recognize the critical role banks play in the entry and exit of illicit funds and underscores the use of money mules at both ends.
In order to Banks, in order to comply with any of the warnings given in the FATF report, must be able to accurately identify and monitor all crypto-related transactions. This will help you identify the following FATF-listed warnings:
- Customers convert a large amount of fiat currencies into VAs with no logical business declaration in place
- Customers who operate as an unregistered / unlicensed VASP on peer-to-peer (P2P) exchange websites and use bank accounts to facilitate these P2P transactions
- Customers who use one or more credit and / or debit cards connected to a VA wallet to withdraw large amounts of fiat currency (crypto-to-plastic) or funds to purchase VAs are made from cash deposits Credit cards related.
- Customers as potential crypto money mules or victims of fraud
Read the full FATF report: http://www.fatf-gafi.org/publications/methodsandtrends/documents/virtual-assets-red-flag-indicators.html